Online radio advertising network shows promise

The advertising market is gloomy, and radio is in a particular funk. But Doug Perlson still feels pretty good.

Perlson heads TargetSpot Inc., which acquired a rival in October to create the largest seller of Internet radio ads. New York-based TargetSpot will handle online ads for more than 1,000 stations, including those owned by terrestrial broadcasters such as CBS Radio, which is an investor in TargetSpot, and Internet-only radio sites such as those on AOL and Live 365.

Partly because this market is nascent, "our business has a good shot at more than doubling in 2009," Perlson said. His company does not disclose sales figures.

TargetSpot sells 15-, 30- and 60-second audio ads for online radio stations, with companion visual ads, that can be targeted to people in specific geographic areas, based on the Internet address of a listener's computer, among other factors.

Advertisers can also track whether an ad is effective, because listeners can, for instance, click on a link to be routed to a certain Web site.

TargetSpot began two years ago with ads from local businesses. But Perlson said major advertisers such as Wal-Mart Stores Inc., J.C. Penney Co. and Macy's Inc. have signed up.

If TargetSpot can help Internet radio stations make more money, the timing couldn't be better. Radio stations are under the gun to raise online ad revenue because of the higher royalties they could have to pay to stream music over the Internet.

Last year, the Library of Congress' Copyright Royalty Board raised the fees that Internet radio stations pay artists to play their music online through 2010. Online radio stations said the increases were cost-prohibitive and threatened their survival. The prospect led Yahoo Inc. last week to meld its online radio operations with those of CBS Corp.

Congress has passed a bill that would give government backing to deals negotiated on more favorable terms, but there are no guarantees, said Jake Ward, a spokesman for SaveNetRadio, a coalition of online radio stations.

That's where TargetSpot could come in. For now, it is the only independent company exclusively specializing in online radio ads. While the size of the Internet radio ad market is debatable because the largest radio networks do not break out figures for these ads, the most common estimate used is around $500 million, according to eMarketer, a research firm.

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